Akelius Real Estate Management Ltd., Sweden’s largest private own multi-residential company, has set its sights on the Canadian apartment market.
Over the past few months the company has purchased five properties (209 apartments) in Toronto and intends to buy another 800 units this year. Canada’s largest city is its primary focus currently but Akelius does intend to buy in other major centres in the future.
Akelius, which has a property portfolio of 35,000 apartments in Sweden and Germany, views Canada as a place with characteristics that are very similar to its home market: relatively safe and stable and with a growing population due to a steady influx of immigrants.
“We researched the U.S. too and the [finding] was Canada has the good things of the U.S. but not the bad things,” said Jordan Milewicz, the President of Akelius.
Good Growth Profile
Canada’s population growth, which Akelius figures will be powered by immigration of about 240,000 people per year, looks good when compared to forecasts for a declining population in Germany and recession or worse in much of the rest of Europe. “Germany is the only market I would say where you are able to purchase anything without any risk or with a small amount of risk.”
Beyond Toronto, Akelius will need to look at other large cities to reach its stated goal of 10,000 units within three to five years. Those include Montreal, Calgary, Edmonton, Vancouver and perhaps Halifax.
With a track record of nearly 20 years and a portfolio worth $4.6-billion, Akelius has deep pockets to finance its strategy of buying properties that generate a stable cash flow over a long time period. “We are cash buyers so we purchase properties with cash first and refinance them later.”
The company’s initial foray in Canada, comprised of five buildings in three separate purchases, illustrates the Akelius acquisition strategy.
· 2875 Yonge Street. (In the tony Lawrence Park area). “European style,” said Milewicz. “We saw a lot of potential for the rents and also for upgrades to the general areas.”
· 551 Eglinton Ave. East. “Not that unique, not that `boutiquey’ a property but still a good B-plus location within Toronto and there is also some potential for the rents and we want to improve the apartments from inside and also the general areas.”
· 36 Castle Frank Rd. (Rosedale area). “Like the first property on Yonge St., great location with a lot of upside potential on rents and potential upgrades on apartments.”
· 2040 Eglinton Ave. West.
· 2701 Eglinton Ave. W.
The two buildings, purchased together with the Castle Frank property, are “more of a B location but we want to improve these properties as well,” said Milewicz. These buildings will not be as extensively renovated as the Castle Frank and Yonge St. locations.
The Akelius Way
Simply put, Akelius has a “high” and “medium” acquisition strategy. “I would say that half of the properties that we aim to purchase would be these A locations, we call it the ‘small is beautiful’ properties. So A location, boutique buildings with some upside potential and half of the properties that we aim to purchase we call the bread and butter properties. So it means B locations but kind of cash cows. Not too much improvements but still lift the standards to Akelius Living.”
As it has done in Sweden and Germany, the company intends to brand its buildings with the ` Akelius Living’ moniker. The brand promise “means improvement in the flats to a certain level of standard,” said the Akelius. “The people who are moving into our apartments will be proud to be living in Akelius apartments.”
Akelius was founded in Sweden 1994 by Roger Akelius and expanded to Germany in 2006. About three quarters of its holdings are in Sweden ($3.4 billion, with $1.2 billion in Germany).
The ownership structure of Akelius Fastigheter AB (85% is controlled by the Akelius Foundation) reflects the fact that founder Roger Akelius has donated the majority of his fortune to the non-profit foundation).
The Wikipedia entry for Roger Akelius describes him as an entrepreneur and author of technical books on computer programming who is currently in his mid-Sixties. In 2010, it was reported that Akelius, who now lives in the Bahamas, would donate 100 million Kroner (about $15 million) over 25 years to a children’s charity in the wake of the earthquake in Haiti.